Bybit Crypto Insights Report: As the first interest rate cut since December 2024 looms, how might September rate cuts impact crypto and the short-term price targets for BTC and ETH?

Federal Reserve Chair Jerome Powell’s dovish remarks about a potential interest rate cut in September mark a pivotal moment for global financial markets. For the cryptocurrency industry — an asset class that’s highly sensitive to macroeconomic shifts — this dovish pivot could revive investor sentiment, increase liquidity and potentially spur a bull cycle. This article explores the implications of the potential rate cut on the broader crypto industry, especially short-term crypto performance. 

The potential rate cut could herald the beginning of a new rate-cutting cycle

Fed fund rates. Source: Trading Economics

Since December 2024, the Federal Reserve has adhered to a restrictive monetary policy stance, maintaining interest rates at 4.5% in an effort to curb potential inflationary pressures from Trump’s tariff policies. A rate cut in September would mark the Fed’s first easing move in 2025, signaling a potential shift in its policy framework from inflation containment toward economic stabilization. 

Federal Reserve Chair Jerome Powell emphasized in his speech at this week’s Jackson Hole Economic Policy Symposium that the current stability in unemployment and broader labor market indicators gives the central bank room to proceed cautiously as it evaluates potential changes to monetary policy. He described the labor market as being in a “curious kind of balance,” shaped by a notable slowdown in both the supply of available workers and the demand from employers — an unusual dynamic that signals growing vulnerabilities in employment.

Powell warned that downside risks to job growth are increasing, and that policymakers must carefully navigate the delicate trade-off between curbing inflation and avoiding a spike in unemployment. He noted that persistent inflation could be fueled in part by external factors, including tariffs introduced by President Donald Trump, which may raise costs for consumers and businesses. In line with the Federal Reserve’s dual mandate — to promote maximum employment and maintain price stability — Powell stressed the importance of balancing both objectives, especially in a climate of economic uncertainty.

Crypto market reaction and the short-term price target

The crypto market surged in response to Powell’s latest remarks, mirroring the broader upswing in US equities. Bitcoin climbed 4%, Ether soared 13.7% and a wave of double-digit gains swept across altcoins.

In our view, if the anticipated September rate cut marks the beginning of a new easing cycle, the crypto space could be on the brink of a broader rally — potentially ushering in fresh all-time highs across major tokens. 

Next, let’s dive into the projected target prices for Bitcoin and Ether.

Bitcoin's short-term and long-term target prices

An analyst with Standard Chartered is predicting that the price of each Bitcoin unit will reach $120,000 by 2025. Several other analysts predict $200,000-per-unit BTC within 2025.

Bitcoin price. Source: Bybit

Bybit predicts a medium target of around $150,000 for 2025, referencing the drawdown from the 2024 cycle.

Long-term price target

For a long-term investor, it’s fundamental to focus on the five-year target. 

Source: ARK Invest

ARK predicts a target of $300,000 by 2025. That said, it’s beneficial to take note of gold’s $22.5 trillion market capitalization. If Bitcoin had the same market cap as gold, it would be worth approximately $1 million per unit. In five years, even if Bitcoin matches only half of gold’s market cap, its target price will be $500,000.

Ether’s short-term and long-term target price

Market participants and technical analysts are eyeing the following key levels for ETH:

The critical resistance level to reclaim remains $4,867. A successful breakout above this zone would signal a new bullish phase. Note that $5,000 isn’t just a round number — it’s a psychological milestone. ETH has historically struggled at each thousand-dollar increment before surging higher.

Bybit echoes the broader market consensus, identifying $5,000 as Ethereum’s next major resistance level. As noted, this threshold isn’t just technical — it’s deeply psychological. Historically, each thousand increment has acted as a mental barrier for traders and investors, often requiring multiple attempts before a decisive breakout. ETH’s ability to conquer these levels has typically signaled the start of new bullish phases, driven by renewed confidence and momentum. With exchange-traded fund (ETF) inflows surging and network fundamentals strengthening, many analysts believe that a clean break above $5,000 could open the path toward $5,500 and beyond — especially if macro conditions remain favorable and institutional interest continues to build.

Medium-term target price

Market participants are projecting a year-end 2025 price target for Ether in the range of $6,728 to $7,194, reflecting growing confidence in both its long-term trajectory and sustained bullish momentum.

Source: TradingView

Ether’s recent price recovery is mirrored in its market value to realized value (MVRV) ratio — a key on-chain metric used to assess whether an asset is overvalued or undervalued relative to its historical average. As of early April 2025, Ether’s MVRV had dipped to 0.88, signaling a period of undervaluation and investor caution. Since then, it’s rebounded sharply to 2.11, reflecting renewed market confidence and growing speculative interest.

This upward trajectory in MVRV suggests Ether is entering a more bullish phase. Historically, during peak market cycles, ETH’s MVRV ratio has reached significantly higher levels. 

For example:

• In the 2021 cycle peak, Ethereum’s MVRV ratio reached approximately 2.7, which — if replicated — would imply a price target of around $5,600 per unit.

• In the 2017 cycle peak, Ethereum’s MVRV ratio surged to nearly 5.0 — a level that, if revisited, could support a medium-term price projection of up to $10,500 per ETH.

Rate cuts’ impact on institutional and retail behavior

Institutions

Source: CoinGlass

Institutional investors are increasingly positioning themselves for a shift into digital assets, with hedge funds and asset managers potentially reallocating capital from traditional equities to cryptocurrencies. This trend is gaining momentum as macroeconomic uncertainty and equity market volatility drive demand for alternative investments. Bybit expects spot ETFs to still be the primary sources of exposure for non-crypto native institutions. The AUM for Bitcoin Spot ETFs could reach $200 billion by the end of 2025.

Retail

On the retail side, interest rate cuts often spark a wave of FOMO-driven participation, because lower borrowing costs and a more accommodative monetary environment encourage risk-taking. Historically, dovish signals from the Federal Reserve have led to spikes in online search activity related to crypto investing, followed by surges in wallet creation and exchange sign-ups. This influx of retail investors tends to amplify short-term price movements and increase market volatility, particularly in altcoins and emerging tokens. 

As most crypto continues to reach multiple all-time highs, we expect more FOMO behavior from retail investors seeking to gain exposure to crypto assets.

Final words

While rate cuts offer several potential benefits, it's important to note that a September interest rate cut remains unconfirmed. Despite growing optimism, the decision is still contingent on upcoming economic data and the Federal Reserve’s assessment.

Source: FedWatch by CME Group

Market expectations for a 25 basis point (bps) rate cut in September have surged to 85.3%, with the remaining 14.7% of investors anticipating a more aggressive 50 basis point reduction. However, if upcoming labor data ahead of the September 16–17 Federal Reserve meeting indicates continued strength in the job market, the likelihood of a 25 bps cut could diminish, potentially dampening broader rate cut expectations for the remainder of 2025.

Bybit has summarized the potential scenarios in the chart below. Investors can adjust their market positions as more labor data arrives in early September.